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Ag Economic Insights reports:

The combination of higher commodity prices, strong farm sector profitability, and low interest rates have placed upward pressure on farmland values. While there has been a constant stream of headlines pointing to higher values, it's worth stepping back and considering the geographic trends.

Farmland Values in 2021
Figure 1 shows the annual change in farmland values in 2021. While released in early August, these USDA estimates were based on survey data collected in June 2021. Overall, U.S. cropland values were 7.8% higher in 2021. Across the country, however, the state-level changes were quite variable.

Farmland values were up the most in the Great Plains and the Corn Belt States: South Dakota (+11.9%), Nebraska (+13.8%), Kansas (+13.9%), and Wisconsin (+10.7%). Farmland values were higher, but not nearly as significantly, in the West and Southeast.

Figure 1. Annual Changes in State-Level Cropland Values, 2021 versus 2020. Data Source: USDA’s NASS and calculations.

Long-Term Changes
Year-over-year changes capture many headlines, but it's always helpful to consider the longer-run trends. Figure 2 shows the change in state-level farmland values from 2010 to 2021. Farmland values in the Northern Great Plains - North Dakota (+145%), South Dakota (+123%), Nebraska (+104%), and Kansas (+114%) - have increased the most. Keep in mind a 100% increase is a doubling of values.

Similar to annual changes, farmland values didn't increase nearly as aggressively outside of the Northern Plains and Corn Belt. Values increased only 2.7% in Alabama and actually decreased in Arizona (-0.6%) and New Mexico (-5.1%). This is a good reminder that the farm economy is not uniform.

Figure 2. Long-Term Changes in State-Level Cropland Values, 2021 versus 2010. Data Source: USDA’s NASS and calculations.

Cash Rents
While farmland value turned higher in 2021, it may come as a surprise that cash rental rates were largely unchanged, especially in the Great Plains and Corn Belt. Even the states with the largest changes in values had modest or negative changes in cash rental rates: South Dakota (+1.7%), Nebraska (+0%), Kansas (+0.8%), Wisconsin (-5.5%).

Looking ahead, it's hard to imagine that cash rental rates in the Midwest won't face significantly upward pressure given the strong profitability in 2021.

Figure 3. Annual Changes in State-Level Cropland Cash Rents, 2021 versus 2020. Data Source: USDA’s NASS and calculations.

Wrapping It Up
Conversations about farmland markets are often hyper-local or overly broad. These USDA data and trends are valuable in that the methodology and timing are consistent across the states considered. Also, these data are an important reminder of how variable conditions in the farm economy can be, even over many years.

Looking ahead, upward pressure on farmland values will likely continue into 2022. What's unclear is how much higher farmland values might turn and how long the upturn might last. Beyond farmland values, it's also worth noting cash rental rates resisted upward pressure in 2021. Headed into 2022, it will be important to consider how farmland values and rental rates trend.

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